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Early Warning Legislation Sees Changes—Concerns Remain

Jennifer Smith

By Jennifer Smith, MASB Director of Government Relations

DashBoard, April 15, 2015

House Bills 4325-4330 are aimed at creating an early warning system to identify districts that are or may soon be in financial distress. The House Committee on Financial Liabilities has held three hearings on this issue so far. We expect another hearing this week with the Legislature returning from its break.

As originally introduced, these bills were very similar to the package that passed the Senate last year that MASB did not support. Carryovers from last session’s proposal:

  • Create over 15 different indicators that could designate a school as in possible financial distress and allow the Department of Treasury to begin to require additional reporting or set other requirements.
  • Allows Treasury to bypass the Emergency Financial Manager law and its due process and choices, and put schools directly under an EM.
  • Does not include any meaningful collaboration with ISDs or other local districts to address the issues facing a distressed district.

These bills cast far too wide of a net and will burden our already struggling districts with more reporting mandates.

At the first committee hearing on the legislation, MASB testified to its concerns and possible solutions, including the large number of indicators that could designate a school as in possible financial distress and Treasury’s ability to require additional reporting or set other requirements. The main bill sponsor, Rep. Earl Poleski (R-Jackson), indicated a willingness to work with us and others in the education community on this issue.

The next week, the bill sponsors put forth changes to the bills and the Department of Treasury indicated their support of the revised bills. However, the revisions did not address most of the concerns that were raised by MASB and MASA. The revisions do lower the number of indicators from 16 to seven, but two of the seven are now much broader and encompass six of the former indicators. The requirement for all schools to report their budget and pupil count assumptions to the state remains, as well as the ability for Treasury to request whatever information they deem necessary to evaluate a school.

Another shared concern are the resources needed for a school to comply. Under the budget, MDE and Treasury both saw funding for additional staff to fulfill the requirements created by these bills. There is nothing in the School Aid Budget to address this for our local districts.

While the bill sponsor’s willingness to make changes is appreciated, the new versions do not seem to address the real problems with the proposed legislation as the language is still too broad and the requirements are unduly burdensome.

MASB will continue to work with the sponsor, committee and Treasury to create a plan that will truly help schools avoid a deficit situation. We encourage you to also contact your Representative to urge a true compromise and creation of an efficient and effective system.

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